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Keeping faith

I don’t feel the need to invoke Don Roberto in every post I write here, but it’s hard in this case to overlook his wry observation that he would rather see his taxes wasted in Edinburgh than London.

August is the time when arguments traditionally rage about Scotland’s fiscal performance. They focus on the annual public sector accounts, known as GERS (General Expenditure and Revenue Scotland). Over the last few days I’ve been trying for the first time, and largely failing, to get to grips with them. I’m not the only one. The BBC made such a hash of its reporting of them that it had to make an apology (here).

What I do know is that when they were launched in 1992, the then Scottish Secretary, Ian Lang, wrote: ‘I judge that [GERS] is just what is needed at present in our campaign to maintain the initiative and undermine the other parties. This initiative could score against all of them.’

Since then, Union supporters have continued to use these annual figures as evidence that Scotland is a fiscal profligate which spends massively more on public services than it raises in tax, and would therefore be unable to survive were it to run its own affairs. This year, for example, GERS proposes that with less than 10% of the population, Scotland accounts for more than 50% of the entire UK deficit; a figure which has to stretch even the most credulous of minds.

Independence supporters meanwhile point to the fact that the figures are based on Scotland’s current status as part of the UK, with certain items of public expenditure apportioned that would never have to be borne under independence, and tax revenues not actually identified but simply extrapolated from UK figures. GERS, it is suggested, offers about as accurate a forecast of an independent Scotland’s economic prospects as it does those of a manned mission to Mars.

So the arguments swing back and forth, and as I struggle to grasp the fiscal niceties I have to keep reminding myself that there is a broader, more invigorating backdrop to this examination of what amounts to angels dancing on the beads of an abacus.

… there is a broader, more invigorating backdrop to this examination of what amounts to angels dancing on the beads of an abacus.

The backdrop comes in two shades, dark and light. On the dark side is the story long ago concocted in Westminster, supported by the unionist parties in Scotland, and propagated by the conservative-owned mainstream media, including, disgracefully, Scotland’s two national newspapers, The Scotsman and The Herald, namely that the Scots are incapable of standing on their own two feet. ‘Too wee, too poor, too stupid,’ runs the mantra and for a long time it worked, tapping into an historic and complex lack of national self-esteem. People believed it.

Hand-in-hand with this went the other headline charge, that ’Scots are subsidy junkies’. This myth was comprehensively debunked in the run-up to the 2014 referendum when it was demonstrated that for several decades previously Scotland had in fact been a net contributor; in other words it had paid more than its share of the tax gathered in the UK as a whole—something like 9.3% of the tax for 8.4% of the population.

The subsidy junky narrative also included the accusation that Scotland unfairly receives more via the block grant than other parts of the UK (by about £1,600 per head). The Scottish Government responds that that’s what it takes to provide public services to a dispersed population across a wide geographical area; and that anyway it’s money that Scotland has already sent south and which is now simply making its way north again.

Today, as the competing narratives come under increasing scrutiny, one explanation of the current arrangements runs as follows: Scotland gives England (actually the UK Treasury) all its income (the taxes raised from Scottish people and businesses); England gives Scotland some of it back to run public services (via the block grant, calculated by the Barnett formula) but keeps the rest; England then spends the rest on things that it wants to (HS2 for example); but England always overspends, and so ends up not only keeping some of Scotland’s income, but charging Scotland a proportion of the costs of its, England’s, borrowing (for things that may be of no benefit to Scotland). Almost certainly an over-simplification, but the general point holds. Call it double jeopardy for Scotland, if you like.

Meanwhile, within the limits of its devolved powers the Scottish Government is not allowed to run a deficit and so must balance its books each year. This is reasonably put forward as an exercise in good housekeeping which will come in useful later.

There is plenty more in the backdrop to counter negativity. Take GDP (gross domestic product). Whatever GERS may or may not reveal, it only measures public revenue and spending. GDP measures commercial activity, the value of all goods and services produced and sold at home and abroad, and it has an entirely different story to tell. At a little short of £200bn, Scotland’s current GDP puts it in the top 25 global economies in terms of income per capita, according to the Office of National Statistics. The same body also records that Scotland has at least 34% of the UK’s total natural wealth, including wind, water, timber, oil and gas.

Scotland has long been one of the most resourceful, inventive and determined small nations on earth.

In addition, Scotland has world class financial services, biotechnology, digital and media, food and drink, tourism, engineering and energy sectors, to name a few. It has more global Top 200 universities per capita than any other country in the world. Situated at the continental extremity, it has 25% of Europe’s renewable energy potential and is already able to generate more than 100% of its domestic electricity requirement from renewable sources. Scotch whisky and salmon between them account for more than 25% of all UK food and drink exports. These also include Scottish langoustine, which account for an astonishing 66% of all sales worldwide. In the cultural sector, the Edinburgh Festivals alone generate £300m for the economy.

In short, Scotland is already a wealthy nation, and one whose true wealth as a fully independent state, with all the economic levers and controls that that would entail, has never yet been accurately assessed—on the grounds that it is too complicated to do so.

Nevertheless, Scotland is certainly wealthier and more economically advanced than were the majority of nations to gain independence within recent decades. The Baltic states, for example, Latvia, Lithuania, and Estonia; Slovakia and the Czech Republic; Serbia, Croatia, Bosnia, Montenegro and their Balkan neighbours—they have all managed the transition to self-government, have functioning economies (some admittedly more successful than others), and would no more consider relinquishing their independence than reverting to Communism.

An independent Scotland would face economic challenges, of course. But Scotland has long been one of the most resourceful, inventive and determined small nations on earth. I don’t believe for a moment that it would be beyond the wit of its economists and tax advisers, civil servants and government ministers to deal with these challenges as they arise.

There is, anyway, so much more to independence and the full realisation of Scotland’s potential than public accounts and the balance of trade. Spirit, pride, self-worth, care for the natural world, cultural flowering, strength of community, basic decency and humanity—these will all form part of the independence dividend.

They would certainly have been in the back of Don Roberto’s mind when he said: ‘It stands to reason that the affairs of any country can be better managed from the National Centre than from a parliament constituted [and today, extraordinarily, about to be prorogued] 400 miles away …’ What I hear him say at my shoulder now is: believe in this, keep faith, have the courage of your convictions.

I do believe, quite profoundly. And to anyone who doubts the viability of an independent Scotland, I would simply ask: why, with all its remarkable assets, should Scotland, among all the nations of the world, be uniquely incapable of making a success of its own affairs?

1 thought on “Keeping faith”

And even as your post arrived in my in-box, Jamie, the Union itself is being taken apart by some of the very people who purport to be its greatest fans, namely the right wing of the Conservative and Unionist Party. Scotland’s viability as an independent European country may well be put to the test sooner than we were expecting – and I for one believe it will pass the test. I also don’t accept the canard that one country disengaging from a 300-year-old union with another is more complex than one state disengaging from a 40-year-old union with 27 others. On the contrary, Scotland already has nearly all the institutional, legal and practical systems in place to function as an independent state, and if we remain (as I hope) in the EU we know how that works too. With goodwill on both sides (which may or may not be forthcoming) it should all be eminently achievable.